Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia.

Payments processor Adyen has prized eBay away from PayPal and a high profile customer from Square.  Is there a changing of the guard afoot in the global fintech payments hierarchy, dominated by PayPal and Square?

The context is the seismic change in retail/eCommerce. Brands who embrace the future of retail – a blended and friction-free buying experience across in-store and online, on a global scale – will do well. Of course, to achieve this goal, a fluid and flexible payments partner is key.

While PayPal was at the forefront of the eCommerce revolution, Square and Adyen have been coming up from the rear incredibly quickly, for some time now. We’ve taken a look at all three companies recent investor announcements, to get a sense of how each is tracking in this new competitive landscape.

Processing volume growth

In H1 2019, Adyen reported it processed €104.6 billion in payments, up 49% year-on-year. Over Q1 and Q2 2019, PayPal reported a cumulative processing volume of $333 billion, with both quarters posting solid year-on-year growth metrics of 22% and 24% respectively. Square was the minnow of the three, with a reported gross payment volume of $49.4 billion across the first two quarters of this year. It too, like PayPal, had year-on-year growth in both quarters in the mid 20%’s.

Notably, 11% of Adyen’s reported revenue was directly related to point-of-sale transactions, representing  €11.0 billion and a significant uplift on the prior year, of 67%.

Revenues

Adyen booked net revenue of €221.1 million in H1 2019, up 41% year-on-year. PayPal booked $8.44 billion over the first two quarters, with growth across both compared to the prior year of 12%. Square also cracked into the billions club, booking net revenue of $2.129 billion across Q1 and Q2, up 43% and 44% respectively on the prior year’s corresponding quarters.

For Adyen, Europe remains the largest contributor to net revenue, comprising 65% of the total amount in Q1. However, the business is making inroads in Square and PayPal’s home territory, with North America accounting for 15% in net revenue, the fastest-growing region for the business, with year-on-year growth of 46%.  While most of this is business PayPal possibly lost or missed out on, it won’t come as welcome news to Square either. While Adyen focuses on enterprise customers for now, cross over can occur, like Adyen’s snaffling of juice chain Joe and the Juice from Dorsey’s company.

Margin

Adyen’s reported EBITDA for H1 was €125.8 million, while Square reported adjusted EBITDA across Q1 and Q2 of $167 million. Adyen’s EBITDA margin, a measure of a company’s operating profit as a percentage of its revenue,  is significantly higher than both PayPal and Square, at 57%.

Who has the edge?

While all three companies have unique strengths that can position them ahead of each other in various sub-sectors, the trillion-dollar opportunity that exists in bricks and mortar payments seems pivotal to securing sustained growth, giving the likes of Square and Adyen a possible edge in terms of future growth ahead. Bricks and mortar still outpace online by over $20 trillion in volume, and eCommerce is actually slowing down. It doesn’t help that a good deal of prior growth attributed to the sector was due to Amazon, which clearly clouds any numbers.

The game is far, far from over for PayPal though, who back in March announced a tie-up with Instagram to power their checkout experience. Earlier this year the company also purchased Hyperwallet, and completed the iZettle acquisition. To this day it remains the gorilla in the payments space, and will not give up that mantle easily.

Whatever the case, all three businesses are forging new paths in the payments space and should be on your radar.

Photo by Blake Wisz on Unsplash